Popping A Bubble in Texas

There are all kinds of bubbles – stocks, commodities, housing, tulip bulbs, and even litigation. The Eastern District of Texas (EDtTx) has been the scene of a patent law bubble for the last seven years. However, like all bubbles, it can’t last forever, and it’s only a matter of time before this one pops.

The patent litigation history of EDtTx and the causa sine qua non of its popularity in with the plaintiff’s patent bar, Judge T. John Ward, are described in detail is an excellent article in the March issue of the American Lawyer. The article, titled “Taming Texas” and written by Nate Raymond, describes how Judge Ward nurtured the patent practice in Texas with a “rocket docket” and the support of pro-plaintiff jurors who are strongly partial to the protection of property rights. Among the highlights of the story:

As of 2007, there had not been a defense win in a patent infringement case the district in three years. From 2001 to mid-2006 plaintiffs had won 90% of the district’s patent trials.

The flood of patent cases in EDtTx has created an economic boom in the services industries (hotels, restaurants), and of course in the legal profession. Many lawyers who formerly focused on “PI” (personal injury) now focus on “IP” (intellectual property).

Patent reform working its way through Congress would tighten the venue requirements for patent cases, and dramatically reduce the ability to file cases in ED Tex. The article has a sidebar titled “Waiting for the End of the World,” which describes the economic apprehension created by this proposed legislation. Of course, the local lawyers are nervous as well, and they are lobbying against any change.

860 patent cases have been filed in EDtTx since 2000, 350 in 2007 alone.

East Texas judges are disinclined to grant summary judgment (meaning that cases are more likely to go to trial).

Of course, no trend can continue forever, and the pendulum appears to be swinging the other way in the last year, with a number of defense verdicts. More importantly, lawyers from outside Texas have learned what it takes to win there:

First and foremost, it’s important to hire strong local counsel, and use them aggressively during trial. They can “talk Texan,” something that’s hard to do if you weren’t born and raised there. And local counsel doesn’t mean lawyers from Houston or Dallas – it means “country lawyers” from EDtTx.

Second, jury consultants are particularly helpful in helping lawyers streamline these cases, and make them comprehensible.

Of course, every bubble contains the seeds of its own destruction, and the very thing that made EDtTx so successful is now contributing to its downfall. With a huge number of case filings, the district cannot maintain its reputation as a “rocket docket” that moves cases quickly to trial (something that plaintiff’s lawyers, who are often on a contingent fee, appreciate – inevitably, the faster the case moves, the less money is spent on it). 350 patent cases were filed in the district in 2007, and EDtTx is now the busiest patent district in the nation. In terms of speed, however, it has fallen to 18th, according to LegalMetric, a litigation analysis firm.

The American Lawyer article ends with a sobering warning – even if Congress does tighten up the venue requirements, litigation in EDtTx will not come to a standstill – lawyers are filing cases aggressively to be sure to “grandfather” them in under the current rules. The cases being filed today will precede any changes in the law, and be with us for years to come.